RB investor presentation Half year 2016 29th July 2016 1
Rakesh Kapoor Chief executive officer 2
Disclaimer Cautionary note concerning forward-looking statements This presentation contains statements with respect to the financial condition, results of operations and business of RB (the Group ) and certain of the plans and objectives of the Group that are forward-looking statements. Words such as intends, targets, or the negative of these terms and other similar expressions of future performance or results, and their negatives, are intended to identify such forward-looking statements. In particular, all statements that express forecasts, expectations and projections with respect to future matters, including targets for net revenue, operating margin and cost efficiency, are forward-looking statements. Such statements are not historical facts, nor are they guarantees of future performance. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements, including many factors outside the Group s control. Among other risks and uncertainties, the material or principal factors which could cause actual results to differ materially are: the general economic, business, political and social conditions in the key markets in which the Group operates; the ability of the Group to manage regulatory, tax and legal matters, including changes thereto; the reliability of the Group s technological infrastructure or that of third parties on which the Group relies; interruptions in the Group s supply chain and disruptions to its production facilities; the reputation of the Group s global brands; and the recruitment and retention of key management. These forward-looking statements speak only as of the date of this announcement. Except as required by any applicable law or regulation, the Group expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forwardlooking statements contained herein to reflect any change in the Group s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. 3
Key messages Health and Hygiene focus driving growth Virtuous earnings model delivering Full year targets on track 4
Health, Hygiene, Home category growth trends have not changed materially CAGR Estimated medium term category growth trends RB categories and markets 5
Health & Hygiene driving growth +10%* +5%* +8%* +3%* +7%* +5%* + = Q1 Q2 H1 + = Q1 Q2 H1 Category growth CAGR Category growth CAGR * RB NR LFL growth 6
Virtuous earnings model fully intact and delivering Gross margin +240bps (Mix / project fuel / pricing / Supercharge) +5% LFL Net revenue growth Fixed cost +20bps *at constant exchange rate +40bps (+39m*) Reinvest drive Operating margin +180bps 7
In summary A strong start Net revenue growth (LFL) Net income growth Cash conversion >100% +5% +12%* Interim dividend 58.2p *Adjusted net income, at constant exchange rate 8
Adrian Hennah Chief financial officer 9
Q2 & HY 2016 results Income statement Q2 H1 2016 2015 2016 2015 m m m m Revenue 2,266 2,140 4,569 4,356 LFL % 4% 5% 5% 5% Gross margin 2,740 2,511 Gross margin % 60.0% 57.6% Adjusted operating profit* 1,081 953 Adjusted operating profit %* 23.7% 21.9% Exceptionals (319) (14) Operating profit 762 939 *Adjusted to exclude the impact of exceptional items 10
HY 2016 results Income statement H1 2016 2015 m m Operating profit 762 939 Net finance expense (11) (18) Profit before taxation 751 921 Taxation (223) (212) Tax rate Adjusted 23% 18% Tax rate 30% 19% Non-controlling Interest (2) - Net income 526 709 Adjusted net income* 822 720 Diluted EPS 73.4p 97.5p Adjusted diluted EPS 114.7p 99.0p *Adjusted to exclude the impact of exceptional items and their associated tax effect 11
LFL Revenue growth by Quarter Business Segment 2015 2016 Total NR Q1 Q2 Q3 Q4 FY Q1 Q2 HY FY m NA 3% 3% 5% 4% 3% 1% 3% 2% 1,048 Rest of ENA 5% 4% 7% 6% 6% 5% 1% 3% 1,881 ENA 4% 4% 6% 5% 5% 3% 2% 3% 2,929 DvM 6% 8% 10% 12% 9% 10% 8% 9% 1,457 Food 4% 1% 3% 8% 4% 2% 5% 4% 183 Group 5% 5% 7% 7% 6% 5% 4% 5% 4,569 12
Revenue growth by Quarter Category 2015 2016 Total NR Q1 Q2 Q3 Q4 FY Q1 Q2 HY FY m Health 13% 13% 14% 14% 14% 10% 5% 8% 1,501 Hygiene 3% 3% 4% 4% 3% 3% 7% 5% 1,934 Home -1% 2% 5% 1% 2% 3% -1% 1% 834 Portfolio -3% -6% 5% 10% 1% 1% -8% -3% 300 Group 5% 5% 7% 7% 6% 5% 4% 5% 4,569 13
Margin Analysis Gross Margin At actual % bps v PY H1 2016 60.0% +240bps 2015 57.6% +90bps BEI At actual % bps v PY H1 2016 14.8% +40bps 2015 14.4% +30bps Operating Margin At actual % bps v PY H1 2016 23.7% +180bps 2015 21.9% +160bps 14
Profitability by business segment H1 2016 % 2015 % ENA 25.5% 24.2% DvM 20.0% 16.8% FOOD 23.5% 25.6% Group 23.7% 21.9% Adjusted to exclude the impact of exceptional items 15
Net Working Capital NWC HY16 HY15 FY15 m m m Inventory 752 707 681 % to last 12 month revenue 8% 8% 8% Receivables 1,377 1,208 1,331 % to last 12 month revenue 15% 14% 15% Payables (3,400) (2,948) (2,948) % to last 12 month revenue -37% -33% -33% Net working capital (1,271) (1,033) (936) % to last 12 month revenue -14% -12% -11% 16
Free cash flow H1 FY 2016 2015 2015 m m m Adjusted Operating Profit* 1,081 953 2,374 Share based payment 33 25 50 Depreciation and amortisation 83 85 171 Net Capital expenditure (260) (76) (168) Movement in net working capital 286 125 (79) Movement in provisions and other creditors (20) (73) (50) Other non-cash movements in operating profit - (2) (33) Trading cashflow 1,203 1,037 2,265 Exceptional cashflow (14) (62) (98) Operating Cashflow 1,189 975 2,167 Net interest paid (8) (17) (31) Taxation paid (242) (202) (480) Free Cashflow 939 756 1,656 Free Cashflow as % of Adjusted Net Income 114% 105% 89% Closing net debt (1,578) (1,793) (1,620) * Adjusted to exclude the impact of exceptional items 17
Korea HS Issue 18
Korea HS Timeline c.2000 Oxy, an independent Korean manufacturer of household goods, reformulates Humidifier Sanitiser (HS) to include PHMG March 2001 RB acquires Oxy August 2011 KCDC* announces link between HS products and severe respiratory disease November 2012 KCDC* Committee formed to review all reported cases of injury 2000 2001 2011 2012 HS product less than 0.5% of total RB Korea sales 2000-2011 RB withdraws HS product from market * Korean Centre for Disease Control 19
KCDC Assessments Round Total applicants Category I &II RB Oxy users cat I &II Completion date actual/target 1 361 172 136 Nov 12 2 169 49 45 Oct 14 3 752 Dec 15 To be determined 4 TBD* Open * No numbers published for Round 4 20
Korea HS Timeline 2014 Oxy RB found liable of civil offence of mislabelling; fined 2016 Prosecutor brings criminal charges against multiple defendants Q2 2016 Oxy RB undertakes consultation on a Compensation Plan for Round 1&2/Category I&II victims 2012 2014 2016 2014 - Q1 2016 80% of civil cases brought by victims settled through Court mediation 21
Korea Financials Impact on trading Exceptional costs Contingent liabilities 22
Rakesh Kapoor Chief executive officer 23
New initiatives for H2 2016 24
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Scholl Light Legs Scholl Light Legs Compression Tights For legs that feel great and look great all day long
Amope GelActiv Insoles & Inserts Amope GelActiv Insoles & Inserts Invisible gel insoles and inserts for all types of female shoes Superior all day comfort for tired and achy feet
Mega Red Advanced 4-in-1 Mega Red Advanced 4-in-1 Our strongest Omega-3 supplement. 2X more concentrated Omega-3s vs. standard fish oil
Nurofen up to 8 Hour Relief range Nurofen up to 8 Hour Relief Provides longer lasting pain relief for up to 8 hours with just one single dose Available in tablets, patches and gel formats
Mucinex Clear & Cool Mucinex Clear & Cool Clears congestion. Cools with an instant menthol burst! 30
Optrex Night Repair Gel Drops Optrex Night Repair Gel Drops Restores & repairs your eyes while you sleep 31
Durex Intense Orgasm Gel & Condom Durex Intense Orgasm Gel & Condom Just a few drops of Durex Intense Gel together with the new Durex Intense Condom, to protect and pleasure even more!
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Veet Sensitive Precision Veet Sensitive Precision Beauty Styler Gentleness & precision for sensitive body areas 34
Dettol On-The-Go Sanitiser Dettol On-The-Go Hand Sanitiser Offering germ protection in an easy to carry format anytime, anywhere! 35
Harpic Bathroom Cleaner Harpic Bathroom Cleaner For a perfectly clean & sparkling bathroom 36
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Air Wick Pure Essential Oils Air Wick Pure Essential Oils Fragrance Just fragrance, no wet spray. Now available with fragrances containing 5 Essential Oils 38
Vanish Gold Vanish Gold Now works even on 7 day dried-in stains! 39
2016 Targets 40
2016: Targets - LFL Net Revenue Target reaffirmed Original New +4-5% +4-5% Lower end 41
2016: Targets - operating margin* Original Moderate + year 2 of Supercharge New H1 +180bps + H2 Moderate expansion *Adjusted to exclude the impact of exceptional items 42
Q&A 43
Appendices 44
Analysis of Exceptional costs Total P&L Total P&L Total cash Guidance HY 2016 to date to date m m m m Acquisition, integration and restructuring 390 19 244 189 Litigation provisions 210-210 142 Korea HS 300 300 300 7 45
Reconciliation of Operating Profit to Adjusted Operating Profit HY HY 2016 2015 m m Operating profit 762 939 Adjusting items: Korea HS issue 300 - Acquisition, integration and restructuring 19 14 Adjusted operating profit 1,081 953 46
Revenue growth by Business segment Q2 2016 LFL Acq/Disp FX Reported % % % % North America 3% - 6% 9% Rest of ENA 1% -2% 4% 3% Total ENA 2% -1% 4% 5% DvM 8% - -1% 6% FOOD 5% - 6% 10% Group 4% -1% 3% 6% Due to rounding this table will not always cast 47
Revenue growth by Business segment H1 2016 LFL Acq/Disp FX Reported % % % % North America 2% 0% 6% 7% Rest of ENA 3% -2% 2% 4% Total ENA 3% -1% 3% 5% DvM 9% 0% -4% 4% FOOD 4% 0% 5% 9% Group 5% -1% 1% 5% Due to rounding this table will not always cast 48
Reconciliation in net debt 2016 m Opening net debt (1,620) Free cashflow 939 Shares purchased (400) Shares reissued 61 Purchase of businesses (42) Dividends paid (625) Exchange and other movements 109 Closing net debt (1,578) 49